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tv   The Profit  CNBC  February 8, 2016 3:00am-4:01am EST

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a chain on pet supply stores specializes in wholesome food. lisa: our biggest thing is the nutrition for the pets. lemonis: but the business is anything but healthy. giovanni: it's embarrassing. i'm right back to where we started. lemonis: the stores need an overhaul. -this how you manage inventory? -giovanni: yeah. -lisa: yeah, i mean -- -giovanni: this is our weakness. lemonis: the employees need leadership. i've never been to a meeting where there's no agenda. giovanni: i think you're being a little unfair with how this process goes. lemonis: and the owners need to lose their self-righteous attitude. as a retailer, you have an obligation to deliver the consumer the choice to make that decision on their own and not for them. giovanni: oh, my gosh, that -- i'm -- lemonis: if these owners can't take control, their dream of creating a retail empire will go to the dogs. ♪
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chicago, illinois, is home to bentley's corner barkery, a natural pet-supply store started by lisa and giovanni senafe in 2008. lisa: how many do they need? just one? giovanni: never a dull day at the barkery, at least for now. lemonis: after losing a pet to illness and convinced it was related to diet, lisa was inspired to open a store and carry food made with healthy ingredients. the concept caught on, and sales surged, and within a few short years, lisa and giovanni expanded aggressively -- too aggressively. with seven stores open, over half of them are losing money. i love the concept of healthy products for pets, and the pet-supply industry generates over $16 billion a year. with the right process in place, i feel confident we can fix this broken chain. ♪
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i'm headed to bentley's corner barkery in the arlington heights neighborhood, a suburb of chicago. this is the flagship store, and i'm eager to see the model they have in place. -vic: how you doing? -lemonis: how are you? i'm marcus. nice to meet you. how are you? i'm marcus? -lisa: lisa. nice to meet you. -giovanni: hi. giovanni. -nice to meet you. -lemonis: nice to meet you. [ dog barks ] giovanni: say hi, angel. lemonis: hi, buddy. don't be scared. lemonis: so, if you were describing this business to me, how would you describe it? giovanni: trader joe's for pets. lisa: like the trader joe's or whole foods for pets. we do all-natural food, no byproducts, corn, wheat, or soy in our foods. lemonis: is it dangerous for the animals? lisa: yeah, a lot of them are getting sick. lemonis: the basic premise is we want safety for dogs. -giovanni: correct. -lemonis: and, so, total revenue of this location is approximately? -giovanni: $1.3 million. -lemonis: and of that $1.3 million, how is that broken out? giovanni: 60% of it is probably food. lemonis: what's the most profitable product -in the store today? -lisa: treats and chews. lemonis: what are the margins on stuff like this? lisa: they're about 50% to 60%. lemonis: $12, and this would cost $6? lisa: about $6.
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lemonis: what does the other stuff have? lisa: food, it can vary. sometimes, it's, you know, 25% to 30%. yeah, they're low margin on foods. lemonis: today, the arlington heights location does $1.3 million worth of revenue annually. 60% comes with a 25% margin, and the other 40% comes with a 55% margin. if lisa and giovanni want to improve the store's profitability, they'll have to change the mix, getting it closer to 50/50. so, you get somebody in for the first time. what's a typical bag like this cost? -giovanni: $70. -lemonis: how much? -giovanni: $70. -lemonis: and if i went to, like, petco or petsmart, what would a typical bag be? giovanni: they have from $40 to $80. i mean, their range is a lot bigger than our range. -lemonis: why is that? -giovanni: they carry products that wouldn't meet our guidelines. lemonis: but as people come in, right, if they're on a budget, how do they shop here? giovanni: we don't have it. lisa: we just try to be more specialized. lemonis: i don't know how many people could afford a $70 bag of dog food. with those sorts of price points, you're alienating a sector of the market. and so how do you guys separate your roles? lisa: i'm more branding, marketing, that kind of stuff, and he does the numbers.
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lemonis: who focuses on sales? giovanni: the managers, the employees. lemonis: who's in charge of, like, keeping the store up and making it look good? lisa: each location does keep up. lemonis: and who focuses on the managers? giovanni: nobody right now. lemonis: and so you have seven stores all doing their own thing. giovanni: basically, yeah. lemonis: in any business, there should be one leader that's setting the tone, and whether that's the way the store looks or how they merchandise or the product they order, there has to be sort of one person kind of leading the troops. and how many stores -do you have today? -giovanni: seven. lemonis: all in the chicagoland area? -giovanni: yeah, oh, yeah. -lemonis: and so all the stores -make money today? -lisa: no. lemonis: does this location make money? giovanni: oh, my god. this fuels all the growth. lisa: this is our best location. lemonis: what is the goal for you? lisa: we want to scale it. we want to kind of conquer the chicagoland area. we also have talked about acquisition. we did a mini-acquisition already with rogers park. so that was an existing store that was failing, and we went in and purchased it. giovanni: and i have been calling stores
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to see if they'd be interested in selling. i go get the deals and then go, "hey, we'll figure out how to pay for it afterwards." lemonis: so you're in charge of mergers and acquisitions? [ both laugh ] giovanni: with no money. lemonis: it seems odd to me that they're acquiring anything. what they should be acquiring is a leadership process. they should probably worry about home base first. -giovanni: hey, bud! -lisa: oh, that's our son. do you want to say "hey to marcus"?! lemonis: and what is your name? -giovanni: sebastian, say hi. -lemonis: hi, buddy. -give me five. -lisa: this is his buddy. -giovanni: there you go. -lisa: there you go. giovanni: how old was he when you adopted him? lisa: he was only 5 days old. giovanni: sorry, it's been a crazy couple weeks for him. he's got to have surgery next thursday. lemonis: what's wrong with him? lisa: his tonsils and adenoids need to come out. he's had a hard time breathing at night. lemonis: you can tell that all their love and attention is on this baby. and the fact that their son, sebastian, isn't healthy right now clearly would be a distraction for anybody. giovanni: this is where the deal comes crashing. lisa: so, this is our stock room/special orders. giovanni: we just got a delivery.
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lisa: yeah, we just took advantage of some sales, too, so... lemonis: it's literally like a bomb went off in here, and there is crap everywhere. this is how you manage your inventory? giovanni: yeah, if we were perfect... lemonis: then i wouldn't be here. what is all this stuff? giovanni: we moved seven times in seven years, so a lot of it is our stuff, too, mixed in. lemonis: what about the mattress? -lisa: no, that's not! -giovanni: [ laughs ] look, you wouldn't want the life that we had the last seven years, but that's -- -lemonis: why wouldn't i? -giovanni: no, i mean -- lisa: we just moved a bunch of times to save money to -- giovanni: we sold our house. we did what we had to to make it. but now we have sebastian. it's not fair to him. i'm not gonna put him through it, so... lemonis: what do you mean it's not fair? -what does that mean? -giovanni: to him. i'm not gonna put him through what we did. lisa: we don't want to move him all the time. -lemonis: because it's tough. -giovanni: yeah, it's tough.
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[ voice breaking ] we did whatever we had to to survive and never let any of them up there know what it took or it cost me. in seven years, people got bonuses. but now we got sebastian. i can't. i can't. that's why we called. we can't keep going like this. lisa: so the reason we called is not because this is a failing business, but because we know we need help. lemonis: i have to tell you something. when i see all that crap back there, i can have a bad reaction or an understanding reaction. understanding the story behind it helps me understand it. i've seen their best store, and there are some clear-cut problems, so i want to visit another location to see the whole picture. giovanni: hey. -lemonis: hi. -lisa: this is the newest one. lemonis: this is the newest location? this store looks totally different than arlington. the merchandising is different, the layout is different, the lighting is different.
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the whole thing is different. the one thing that's consistent is this place is also functioning like a mini-warehouse. and there's even more inventory piled up here than there was in the other store. giovanni: i know what you're thinking. we literally just unloaded our delivery. lemonis: and i also wanted to check out the store they acquired at rogers park, but i had some trouble finding it, 'cause there was no sign of bentley's anywhere. giovanni: we only took it over in december. lemonis: yeah, and, so, when you took it over, did you think it was a good idea to change that awning so that i didn't drive by it three times? lisa: yes, we need to change that. -giovanni: yeah. -lemonis: why haven't you? -giovanni: just money -- -lemonis: don't say money to me. don't say money to me. we have money to pile inventory up to the hill, but not money to make sure that the sign is right. one of the most important parts of an acquisition is being able to integrate that new company into an existing platform, but that assumes that there is a platform. so, how often do they come to your store? dan: if i'm lucky, probably a couple times a month. lemonis: do you wish they came more? dan: i appreciate any time that i get with them. i think we've been self-governing for so long. lemonis: and it really seems like
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these stores operate independently, and there's not even a leader. after taking all this in, i'd like to talk to lisa alone and get her own perspective. i like the fact that you guys have a number of stores. i don't like the fact that they all look and feel and operate differently and that there's not clear management and there's not a clear process and there's not central distribution. so how is the ownership split up? you guys are 50/50? lisa: well, we got 30% shares, investor. lemonis: what investor? does he have shares of the company? -lisa: yeah, 30%. -lemonis: and so you own 70%? lisa: mm-hmm, we know we did too much too fast. we never knew it was gonna take off like it did. lemonis: yeah. gio and lisa's biggest struggle is that their exuberance to grow is outweighing the prudence to do it the right way. but i already know that their process is bad. now i need to see what their financials look like. well, let's look at the numbers. you don't have a 12-month. giovanni: i just have year to date, yeah. lemonis: and so is there a consolidated p&l? giovanni: yeah, it should be all the way here. lemonis: at the end?
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the total consolidated-income statement is $2.3 million of revenue through the first seven months of the year. on a year-to-date basis through seven months, you've lost $12,000. giovanni: oh, okay. lemonis: the business is losing money, so why in god's green earth would you open another store? did you not know that it was losing money? giovanni: no, i'll be honest with you -- to run our business, i don't follow this. lemonis: what do you use? giovanni: what's in the bank and how much money we have and how many bills -- lemonis: so you're running it on the checking account? giovanni: i'm running it on day-to-day cash flow. lemonis: the reason that the alarm bells should have gone off that you were losing money is that you didn't have cash to open a store. how much money did you raise from this partner that i heard about? giovanni: $300,000. he has lent us money before. when we took over rogers park, i had to take a loan. lemonis: how much did he lend you, in addition -- giovanni: $100,000. lemonis: so you've gotten $400,000 from him. -giovanni: yes. -lemonis: that's how you were able to afford the other stores, but you're not generating
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-a profit today. -giovanni: yeah, you're right. how much do you guys get paid? giovanni: probably 30 grand this year -- 34 grand. we sold our motorcycle one month to pay rent. we're borrowing on our life-insurance policy to pay for sebastian's surgery. but guess what? we chose this. lemonis: is that where that money is coming from? it's coming out of your life-insurance policy? giovanni: yeah, we took a loan out. lemonis: the fact that you did whatever you had to to take care of your child's surgery -- that's the kind of people i want to do business with. giovanni: but it's embarrassing. it's seven years. and i'm taking a loan. i'm right back to where we started. lemonis: here's the thing, okay? most people don't have the courage to do what you do, although i wish you had a little less -- to keep pushing and opening stores, okay? most people don't have the courage to adopt a baby like you guys did. and i was adopted, and so i have kind of a cool connection with anybody that adopts. you should be very proud of yourself. listen to me. we just met. what i have to get my head around is can i help you? let me look at these financials,
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and i'll get back in touch with you, okay? giovanni: yeah. ♪ lemonis: hi, guys. nice to see you again. you look wonderful, by the way. when i learned that bentley's had a 30% investor in the business, i wanted him to be at the negotiation. that's a serious amount of equity. david, part of the reason that i wanted to meet you is because i always feel it's important to meet the person that wrote the last check. david, are you aware that the business loses money today? david: loses money today, but it's also -- a lot of new stores have opened. lemonis: one thing that you said to me was you want to continue to grow, and you want to open stores. are you looking to acquire stores right now? david: we are. lemonis: i expected, david, that you were gonna be the disciplinarian, but you're as drunk as they are. david: yeah, but in the next 18 months,
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we'll have positive cash flow, and i know both of them work hard. lemonis: and are there deals on the table right now? giovanni: i mean, we got callbacks. that's what we're trying to mention was this all happened very quick. i thought there was an opportunity to acquire seven stores. lemonis: how much revenue do they do? -giovanni: $3 million. -lemonis: how much money do you need to make all the acquisitions? giovanni: $1.1 million would be a purchase price. lemonis: not only do they open stores too fast, but they're now telling me that they want to double the size of their company. are you kidding me? it does frighten me that you guys think you're ready for acquisitions. should i expect that in the new acquisitions you make, you'll also forget to change the sign for nine months? acquisitions are not a good strategy for a company that doesn't have its foundation right. in order for this acquisition to happen, they're gonna have to prove that they can run a consistent business, they can provide leadership and provide direction, and understand the importance of making that acquisition.
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you guys have clearly created a culture that i think is amazing. honestly, you should be very proud of yourself. so i want to make an offer. my offer is $1.7 million, okay? and it is broken up into two distinct checks -- a $400,000 equity check that will go to put sufficient working capital on the company's books to make the renovations of the stores and for the i.t. infrastructure. the second check i write will be for $1.3 million. that will go to fund the acquisition and the conversion of those locations so that they're compliant with what our new look is gonna be. but i'm gonna have to be convinced that the acquisition is the right thing. for that, i'm gonna want 40% of the equity. and if you pay off the $1.3 million, it drops to 25%, and the 15% will go back to you guys.
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lisa: my biggest concern is with products. i want to make sure that i still have the say in what products come in through the door -- that they fit in our niche. lemonis: i can't do that for you. let's say that the chairman of the company said, "i want you to create a product that meets her standards, -what are you saying to them? -lisa: no. we can't run a business that way.
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lin what products come in through the door --he say that they fit in our niche. lemonis: i can't do that for you. but what i can tell you is that i subscribe to your same philosophy, and i would never put my own dog in jeopardy or anybody else's dog in jeopardy to make a buck. lisa: okay. giovanni: good enough for us, yeah. lemonis: so, my offer is $1.7 million for 40% of the business. when you pay back the $1.3 million, it reverts back to 25%. do we have a deal? giovanni: oh, my god. -is it fair? -david: i think it's fair. giovanni: i think it's very fair. -lisa: okay. -giovanni: are you -- -lisa: i'm happy. -giovanni: yeah. -lisa: we have a deal. thank you. lemonis: all right? when i write this check, i really am 100% in charge, for real. giovanni: we're looking forward to it. lemonis: this is an unusual transaction for me
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because it involves two separate offers. offer 1 is $400,000 for 25% of the equity. offer 2 is $1.3 million to give them the ability to finance the acquisitions they want to make. i will get a nominal interest rate on that loan, but as a kicker for lending them that $1.3 million, my equity, instead of being 25%, will ratchet up to 40%. when they pay that $1.3 million back, including the interest, my equity will go back down to 25%. i want them to understand that if they really want to make this acquisition, it's gonna cost them a lot. lisa: thank you. lemonis: thank you. thank you. congratulations. ♪ now that i'm in business with lisa and giovanni, i've asked them to gather the entire staff at the glenview location so we can talk about the road ahead.
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i thought we could get everybody together. we made a deal -- david, giovanni, lisa, and myself made a deal for me to put up to $1.7 million in the business. my deal is for 40% of the equity, and it can change after that, but i'm also 100% in charge. this business does not have a clear leader, and we're gonna have one. giovanni, going forward, i'm looking to you to be responsible to run the operations. the store managers have to report to somebody. we're gonna get a central warehouse, so inventory isn't gonna sit here. -you're happy about that? -vic: i'm ecstatic. lemonis: so, the key to this whole thing is about creating consistency. the biggest one that's a problem is arlington, and so that store is gonna go through a major transformation, and we're gonna build up what we think the stores are supposed to look like. the biggest problem i'm having right now is that it doesn't feel like we have affordable foods. today, our prices are averaging like $70 for a 30-pound bag, and the market is from $30 to $80. we need to drive that number down
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so that more people can come in and shop here, because i think you're missing out on a lot of the market. vic: this whole thing's based on just the quality of the product. lemonis: i'm not as self-righteous as you guys are about product. lisa, from my perspective, you're the person that determines what the brand promise is, what the products are that come in and out. so what i want you to do is actually write it down on paper. i want to see, bullet point by bullet point, exactly what it stands for. anything else before we get to work? okay. ♪ -lisa: hey, how are you? -lemonis: i'm marcus. -lisa: marcus, this is kacey. -kacey: nice to meet you. lemonis: nice to meet you? how are you? pet food experts is one of the largest distributors of pet food in the united states. not only do they carry a ton of brands, but they carry a wide variety of price points. that's why we're here. do you have your mission statement? lisa: this is our food promise that we go off of. lemonis: "no byproducts, corn, wheat, or soy." -"no chemical preservatives." -kacey: mm-hmm. lemonis: why don't we walk and just kind of get a feel for it?
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i need lisa's expertise and her brand promise to determine what foods are gonna work and not work, but i also need her to be open-minded. -do we carry this nutro? -lisa: no. lemonis: does it have byproducts, corn, wheat, or soy? lisa: this one i don't know. no, this one doesn't. lemonis: chemical preservatives? lisa: doesn't look like it. lemonis: so, this has the food promise, but you won't carry it. -lisa: no. -lemonis: why? lisa: when we actually first opened, they were the biggest ones that had all the recalls and stuff, too. lemonis: what kind of car do you drive? lisa: a suburban. lemonis: have chevy ever had a recall? i like the fact that she believes in something, but once she actually takes that and applies it against products that are available in the market, she's now coming up with other excuses of why she doesn't want to carry products. -lemonis: this brand here. -kacey: yes. -lemonis: any good? -kacey: yes. -lemonis: does it sell well? -kacey: it does. lemonis: what's the price like on a bag like this? -kacey: 20 bucks. -lemonis: is that a good price? lisa: yes, we have some brands that -- lemonis: "features premium formulation, multi-protein sources, made in the usa."
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lisa: "made in the usa." i'm telling you, the packaging won't do well. lemonis: now you're a packaging expert? lisa: no, but i'm telling you. [ horn honks ] lemonis: "quality loyal, not brand loyal." "focusing on brands that get it right from the start." lisa: there's a lot of brands that have made garbage food for a long time and now realize there's a natural market. and they're making one or two skus to jump on the bandwagon, but their integrity -- you know what i mean? lemonis: but you just said you were product loyal, not brand loyal. so doesn't that go both ways? you want to kick somebody out because they do something that you don't like, but you don't want to let somebody in if they start to adjust to your way of thinking. lisa: because they still are selling the bad products out there. if they truly believed that this one sku should have byproducts, corn, wheat, or soy, then why wouldn't they implement it throughout? lemonis: let's say that, like, the chairman of the company went into a meeting, and he said, "i want you to create a product that meets her standards, 'cause i want to do business with her." -what are you saying to them? -lisa: no. lemonis: it's kind of a double standard. we can't run a business that way. she keeps telling me that she's product loyal and not brand loyal.
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that's a bunch of [bleep] is what it is. build a business, set a standard, write it down, follow the standard. the thing that worries me about doing business with you is that i feel like if i make a mistake, you're not gonna forgive me. lisa: no, that's not true. lemonis: well, then, why can't you forgive them? ♪ i've asked giovanni to bring his store managers to my office for a meeting. up to this point, these store managers have been left to their own devices -- different looks, different merchandising, different inventory plan. and that's not okay with me. if giovanni wants to make this acquisition, he's gonna have to prove that he can be a leader and set the plan and enforce it. giovanni: all right, guys, one, you know, part of -- lemonis: i'd like you to explain to everybody what's the purpose of today. giovanni: so, the purpose is, i wanted to give you an update of what's going on with us and then share ideas. but on our end, we have been working on an acquisition.
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lemonis: it still hasn't been determined yet. giovanni: correct, yeah. just saying we're working on it. lemonis: do you have an agenda for the meeting, by chance? giovanni: i didn't know what the agenda was. lemonis: when you normally get together, do you guys have, like, a list of topics that you want to cover? krystle: we don't get together. lemonis: you want to take a crack at writing an agenda on the board so we can have a process to it? giovanni: sure. shay: i would really, at this point, like to know when we're doing good and when we're doing bad. giovanni: so, i would say first off is just feedback from managers. dan: i would like to get more information or more timely information when special orders are coming into the store. giovanni: a lot of that will get solved with the ware-- lemonis: keep going. i'll do mine. giovanni: okay. lemonis: what i'm seeing from giovanni today is worrisome. he's not communicating with his people, he's not guiding them, and he's asking them for the agenda instead of setting it himself. do you guys feel today that this company is in good enough shape leadership wise to make an acquisition of a whole nother business? -dan: no. -lemonis: no. krystle: i don't know how we can take on more when we haven't perfected what we're doing right now.
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giovanni: what's ironic is the acquisition is probably run way better than ours. lemonis: do you see why i'm scared to make that acquisition? as a retailer, you have an obligation to deliver the consumer the choice to make that decision on their own and not for them. giovanni: oh, my gosh. hold on a second.
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you love your employees so much, which i think is amazing.sition? but you love them so much that you don't give them any tools or resources or information. becky: well, we want to make it easy. giovanni: yeah, no, and i know that. lemonis: the point that i want to make to you is if you're gonna lead an organization of 5, 10, 15, 25, 30 stores, the only way you can do it is in a structure. the problem is is that for this business to run and make a profit,
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somebody has to be tactical. i just need you to be a leader. and the only way this company is gonna really grow is if you guys feel like you're part of something. and so i'm gonna put in a system that's gonna allow you guys to videoconference from somewhere in the store so you guys can see each other. see, that's why being in person helps, 'cause i can read your face. all right? thank you, guys. dan: thank you, marcus. giovanni: you won't like the new giovanni, 'cause i've been way too easy. shay: tactical giovanni. giovanni: yes, tactical giovanni. ♪ lemonis: here's what i want to do. this location has to be totally different. -lisa: the whole look? -giovanni: how so? lemonis: now that you're talking about making acquisitions. honestly, this doesn't look good. from a design and process standpoint, the bentley stores have nothing in common it's bad enough when we're talking about seven locations, but if this business is gonna expand further,
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we need a consistent inventory plan, consistent merchandising, a consistent look and feel, and a consistent process. arlington heights is gonna be the model. i told you yesterday that i wasn't willing to make the acquisition unless you can prove that you are a leader. -giovanni: okay. -lemonis: and that running a manager's meeting is part of that, being open-minded is part of it, and change is part of it. and so i want to see what sort of leader you are. -giovanni: okay. -lemonis: today, we're closing the store entirely. giovanni: i don't understand lemonis: we're locking the door. giovanni: now? right now? -lisa: okay. -giovanni: for how long? lemonis: as long as it takes to get the store redone. giovanni: okay. lemonis: well, there's a truck and boxes and people here to start loading. giovanni: come on! is that really -- are you being serious? ♪ lemonis: i knew the idea of closing this store quickly would catch gio off-guard, but i need to know that he can adapt to change and lead people through tough situations. it's a small test of his leadership,
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but it's an important one for me. giovanni: we'll load -- that's the biggest thing. displays will move out tomorrow. so let's just empty out all the cabinets, all the treats. all hands on deck. what we need to do now is just start boxing everything up. keep it in one category. don't throw brushes with treats -- just toys, treats, accessories. lemonis: i set up the central warehouse so everything we pack up today is going there. the goal is to have one hub of inventory so that as it sells it, it can replace it and when that inventory comes in from the manufacturer or the distributor, it's sitting in one place and you know what's there. man: gio! [ dog growls ] lemonis: i like how you're taking direction and giving everybody direction and solving problems. it's the most i've seen you lead since i've known you. -i mean that in a nice way. -giovanni: no, thank you. lemonis: like, i feel like i'm watching you like a field general. giovanni: and i am that, and i know i can be. lemonis: okay, let's keep going.
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♪ lemonis: so, i wanted to kind of get out and talk to people and find out, "okay, how many people have ever heard of bentley's? do you know where it's at? do you know what we stand for?" it's kind of getting an understanding of market research, right? ♪ this is a nice park. lisa: this is a very nice park. giovanni: okay, go get your owners. giovanni: this is shay, the manager. anything you ever need... lemonis: uh-oh, okay. this is lisa and giovanni. lisa: hi, nice to meet you. lemonis: they're the owners. -where do you buy your food at? -woman: petsmart. lemonis: is it because of price that you go there? woman: we get a purina special blend. he's allergic to corn, i think. giovanni: our whole store is corn-free. that's where we're different. lemonis: where do you get your food?
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woman: usually at petco. don't, like, you guys have the grain merrick? she's not a grain-free girl for some reason. lemonis: so she needs grain. woman: she needs the grain, yeah. lemonis: do we have merrick brand dog food with grain? lisa: we don't. lemonis: this is an example of lisa's self-righteousness getting in the way of them being a profitable business. they need to carry products that meet everybody's needs. if it falls within the brand promise, they need to carry what the customers want, not what they want, and i'm gonna push this thing all the way to the wall. going forward, any product that meets the bentley's food promise should be available. so, like, when somebody says, "i want grain-filled," as opposed to grain-free, you're gonna be a powerhouse. you got to carry everything. giovanni: i think we'll lose a lot of credibility with a lot of the customers on why they trust us. lemonis: let the customer decide what they want. giovanni: and then we have no niche. i'm sorry. lemonis: the niche is products that meet this food promise. giovanni: i'm not gonna agree with it. lemonis: so, then don't have a brand promise, 'cause it doesn't mean anything.
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-giovanni: i think it does. -lemonis: then, if it does, then if somebody complies with it, why can't they get in? what i never knew i was signing up for was people that weren't willing to give other people a chance who were trying to make it right. and so maybe you shouldn't have done a deal with anybody. you don't give people a chance. giovanni: hold on, we give more chances than anybody. lemonis: i'm only asking you to carry the ones that reach your standard. giovanni: but if the brand's majority -- lemonis: you told me that that was the most important thing to you. i asked you to write it down. i'm willing to live to it like the bible. as a retailer, you have an obligation to deliver the consumer the choice to make that decision on their own and not for them. giovanni: oh, my gosh, that -- i'm -- -lemonis: oh, b-but what? -giovanni: hold on a second. lemonis: have you taken the time to come here before? -giovanni: no. -lemonis: and so you draw these conclusions about people like that. i mean, 'cause if we're just gonna be negative, this was just a giant waste of time.
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lemonis: as a retailer, you have an obligation to deliver the consumer the choice to make that decision on their own and not for them. giovanni: oh, my gosh. that -- i'm -- -lemonis: oh, b-but what? -giovanni: hold on a second. lemonis: my attitude is that if it meets the brand promise, we're going to carry it somewhere in the system, even if it's just online. if they're unwilling to budge or be open-minded, then i'm unwilling to move forward. the challenge with being a retailer in america today is that the consumer wants to make the decision for themselves. i want to put it online and let the customer decide.
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you know what the biggest, baddest store in the world is? your website, because you don't have anything invested in it. and you could be everything to all people inside of lisa's requirements. i'm not asking you to make a decision today. i'm asking you just to think differently. ♪ you've seen the drawings. it's gonna look like a totally different store. fundamentally, we still have some unresolved issues, but construction is under way at the arlington heights location. we're gonna have proper displays and signage so that our customers can easily find what they're looking for. we're also gonna change the layout of the store so that we send them in the direction that is most profitable for us. we want them to see the kind of merchandise, like clothes, toys, and the chew bar, that comes with much higher margins than the commodities, like dog and cat food.
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giovanni: the graphics are awesome. -lemonis: even stuff like this. -lisa: yes, that's fantastic. giovanni: and it actually advertises animals. lemonis: i spent about $100,000 between changing out the floors, changing out the ceilings, adding new lighting, building all new fixtures, putting in a new i.t. infrastructure. with one week till the grand opening, we got to push it. giovanni: i'm looking at it now what our customers are gonna see. -lisa: i know. it's amazing. -giovanni: it's awesome. ♪ lemonis: what's up, guys? i'm flying lisa and gio to pennsylvania for a special trip. i haven't told them where we're going because, quite frankly, i want them to go there with an open mind. ♪ freshpet is one of the country's largest manufacturers of fresh, natural foods for cats and dogs.
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its products are top-notch, but it's mainly sold into big-box retailers, like petco and walmart, making it the kind of brand that gio and lisa love to hate. -giovanni: this is a surprise. -lisa: yeah. giovanni: i don't know what your intention is, but out of every brand, it's hard to put the energy behind this one. lemonis: so their food's not good? lisa: not that it's not good, but they're doing more for the grocery-store chains than the independents. lemonis: before, it was no soy, no wheat, no corn. now it's like, oh, now there's like another reason to not do business with you. giovanni: it's just difficult for us to put the energy behind a conglomerate that don't fit our stable or our beliefs. lemonis: right, but have you taken the time to come here before? -giovanni: no. no. -lemonis: have you ever seen what their production process is? -giovanni: no. -lemonis: have you sat down and listened to what they have to say? -giovanni: no. -lemonis: and so you draw these conclusions about people like that. i mean, 'cause if we're just gonna be negative, this was just a giant waste of time. if your business is in trouble and you need my help, log on to...
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lemonis: if we're just gonna be negative, this was just a giant waste of time. there's no point in wasting our time. giovanni: we're not being negative on the product, no. lemonis: before we even walked in the building, they're being not open-minded, not willing to change, telling me, "no, no, no. this is not how we do it." if i don't start to see a flip in the way they look at things, then we got a problem. do you agree that your brand promise and this company, freshpet, line up from a brand-promise standpoint?
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-giovanni: yes, yes. -lisa: yes. lemonis: so if it meets the brand promise, why are we having this discussion? i think what we should do is we should go in there. if we like the product, then we can build a relationship. giovanni: sure. okay. -lemonis: and be open-minded. -giovanni: you've got it. lemonis: richard, i'm marcus lemonis. -how are you, sir? -scott: hey, scott. lemonis: scott, nice to meet you. -scott: hi. -lemonis: this is lisa. -we'd love to get a tour. -giovanni: yeah. scott: we need to get you guys suited up. giovanni: holy [bleep] ♪ lemonis: what we saw when we walked into that place is the most professional, state-of-the-art food-manufacturing facility that i had ever seen in my life. giovanni: wow. scott: this is our q.a. lab. lemonis: so, this is chicken, beef, salmon, and egg. scott: all basically no byproducts, no corn, wheat, soy. lemonis: we saw their attention to detail, and we saw the great pride they have in making sure that pets stay healthy. i could tell this is having a real impact on lisa.
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man: check it out. lisa: it's awesome to see it in action and how it goes from this to the actual product. it's very impressive. lemonis: what i hope lisa learned from this trip is in order to grow your business, you have to be open-minded and learn and do research. freshpet is an opportunity for them to grow their business. if they hadn't gone, they'd have never found that opportunity. do you feel more open-minded now? -lisa: yes. -giovanni: we have to be. lemonis: do you feel more open-minded? -lisa: i do. -lemonis: all right. -let's head out. -giovanni: awesome. ♪ lemonis: so, in order to make bentley's more consistent, from the accounting numbers to inventory management to just sharing data, i have installed salespad at all the locations. matthew: when you take an order on the register here, within minutes, it makes it back up to the cloud. lemonis: every store will have access to their sales numbers and will be able to properly track their inventory in real time. all the inventory here would be bar-coded, and so as you sell on a tuesday,
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it would replenish on a wednesday. it allows the stores to grab inventory from the central warehouse, already up and running. and i've also had at&t connect put in that allows giovanni to have regularly scheduled meetings with his managers without them having to leave their store or interrupt their business. you can see if there's a manager that's not engaged or they're not paying attention. it doesn't get any easier than just pushing a button. -here, let's get started. -giovanni: okay. hey, guys, so, this is just gonna give us the ability to not only see each other, but to relay information right as it's happening. lemonis: this is really gonna be the way i want you guys to communicate when you can't physically get to the store. giovanni: i'm excited, guys. woman: [ laug]s ♪ -giovanni: what is all this? -lisa: cat litter. giovanni: i can't have this much money sitting back here. it's hundreds of dollars, and we're slow. i want over-communication now.
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we got to stop guessing at what works. you know, i just want to get in the habit of being proactive on stuff. lemonis: to see gio communicate with his staff succinctly and give them clear direction is really giving me a lot more confidence that i had before. he's come a long way. giovanni: we took to heart a lot of what you said. we brought on a lower-priced brand and have a second one on the way to really go after the grocery-store customer. lemonis: so you made that decision? -lisa: i did. -giovanni: lisa did. lemonis: good job. ♪ so, you guys ready? -lisa: yeah. -giovanni: yeah. lemonis: are you dying to turn around? [ both laugh ] what you're gonna see today is kind of the future look of what could be a regional or a national brand. -are you ready? -lisa: yeah. giovanni: i'll let you go first. lisa: i'm closing my eyes. lemonis: close your eyes, close your eyes. -close your eyes. -lisa: oh, my god. giovanni: i'm looking at the floor. oh, my god.
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-lemonis: are you ready? -lisa: yeah. giovanni: i'll let you go first. lisa: i'm closing my eyes. lemonis: close your eyes, close your eyes. -close your eyes. -lisa: oh, my god. giovanni: i'm looking at the floor. lisa: oh, my god. giovanni: oh, my god. lisa: it looks fantastic. giovanni: i'm trying to remember what it used to look like. lemonis: bentley's corner barkery is now much more inviting and a lot brighter. lisa: it looks fantastic. oh, my god. giovanni: wow. lisa: [ laughing ] oh, my god.
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giovanni: i mean, look at the graphics. lis, look at the dog house. we didn't have one picture of a dog before. lemonis: uh, i know. we've brought in a lot of graphics so that people could feel like they're in a pet store. giovanni: "the snack wagon"? i'm not kidding you -- i am totally blown away. giovanni: we've created a new display for the chew bars. it's our highest-margin product, and we want to make sure that customers are attracted to it. we put two of them in so that we constantly are reminding people. highest-margin items, right? the commodity margins are on that wall, kind of impulse section. -giovanni: sure, yeah. lisa: i just can't stop looking around. it's crazy good. giovanni: it feels like it's three times the size. -lisa: yeah. -lemonis: there's less than half of the inventory. and, so, part of merchandising it this way
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is taking the categories that matter, stocking them properly, getting the margin, getting the turn, and letting it just pump out cash. giovanni: yeah, rather than piles sitting there. yeah. this is beyond what i ever imagined. -lisa: thank you so much. -giovanni: yeah. lisa: [ voice breaking ] seriously, thank you. i can't tell how much this has helped our family and our -- thank you. oh, my god, i love it. lemonis: before we open the store, i wanted to talk to lisa and giovanni about this potential acquisition. i feel like you guys have made a lot of progress. but i worry that progress can be easily derailed with overload. how strongly do you feel about the acquisition? on a scale of 1 to 10, in terms of being -- -giovanni: 10. -lemonis: you're a 10? giovanni: you created the 10. if this was not so good, it would be . lemonis: i'm willing to take the leap with you, okay? i'm willing to take the leap with you.
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lisa: [ laughs ] lemonis: all right? i'm willing to take the leap. ♪ how are you? they can't wait. it's the grand opening of bentley's corner barkery. what do you think of the store? -and who is this? -woman: luke. lemonis: luke! i'm excited that people are actually able to move around this store. it's not cramped, it's not overloaded, and there's got to be 125 people in here. [ dog barks ] -oh, this is bentley? -giovanni: yeah. -lemonis: hey, buddy. -giovanni: you want a piece? -okay, go ahead. -lisa: is that good? oh, yummy. lemonis: people are picking up new products. they're seeing some of the new things that were added. i feel like we got it right. i think your dog is shoplifting. [ laughter ] with its limited selection of products, the old arlington heights store maybe covered 20% of the market. by adding more varieties and more brands at wider price points, we can now cover 60% of the market, and that's gonna have a huge impact on sales. before, the arlington heights store averaged between $2,800 and $3,200 a day.
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and now, since the grand opening and re-merchandising and the addition of more affordable products, it's averaging closer to $5,000 a day. -what do you think? -woman: it's awesome. -lemonis: you like it? -woman: it's really neat. lisa: can we get everyone's attention for a moment, please? we want to sincerely thank marcus and his team... giovanni: you want to thank marcus. lisa: ...and all of our employees. giovanni: 50 stores in 12 months. we'll be right there, so just come along for the ride. lemonis: when i first met giovanni, his biggest goal was providing a bright future for his son. they now feel that not only is their family unit strong, but their business family and their infrastructure is really strong. don't tell gio, but it wouldn't surprise me within five years if this company had 100 stores around the country. [ dog barks ]
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♪ good morning. everybody, welcome, i'm louisa bojesen. this is "street signs." >> and i'm nancy hulgrave. these are your headlines. well, will the year of the monkey bring more uncertainty to the markets. european stocks holding on to that flat line following last week's sharp losses after light trading across asia. >> but basic resource is the clear outperformer, shares rally offsetting a profit after the gold prices inwo

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